How Much Do I Need to Retire?

If you’re asking yourself how much you need to retire, congrats—that’s a great question!

Unfortunately, most people aren’t even thinking about it, let alone asking. Only 38% of all workers in America have saved $250,000 or more for their retirement, and 22% haven’t even saved $10,000.¹

 

Lots of folks dream about retirement, but do you know what you call a dream without a plan? A wish. (Wishing for a gigantic nest egg won’t make it real.) If you really want your dreams to become reality, you need to set a goal and work hard to reach it—and your retirement number is that goal.

What Is a Retirement Number?

Your retirement number is the amount you need to save so you can live off the growth of your nest egg in retirement—without depending on debt, Uncle Sam or anyone else to bail you out.

So, how do you figure out your retirement number? And what will it take to reach it? Let’s get to the answers.

How Much Do You Need to Retire?

Here’s the short answer: It’s different for everyone. You need enough money in your retirement accounts to live off the growth of your investments (not the principal). That means you’ll live off the interest generated by your investments.

 

What we teach has always been true: Disciplined, consistent investing over time builds wealth. This is a key part of Ramsey’s 7 Baby Steps, the proven financial plan that has helped millions of Americans build wealth.

Once you’re debt-free and have a fully funded emergency fund, we recommend investing 15% of your gross income in tax-advantaged retirement accounts. That way, you give yourself the best chance to save enough for retirement while still working toward other important financial goals.

How Do You Calculate How Much You Need to Retire?

Our free retirement assessment tool walks you through several steps that will give you a concrete financial number to aim for—and show you how much you’ll need to invest each month to get there.

It helps to start with a clear picture of what your dream retirement looks like. From there, you can decide how much monthly income you’ll need. Other important factors are when you’d like to retire and how much you’ve already saved for retirement.

Let’s walk through these steps one at a time.

What Does Your Retirement Lifestyle Look Like?

You get to choose what your life’s going to be like in retirement, so go ahead—spend some time dreaming about it. Imagine what your average day will look like. That will go a long way toward helping you uncover what your retirement number needs to be.

If you want a simple, stay-at-home lifestyle, your number won’t need to be crazy big. But if you plan on living it up with Caribbean cruises and visits to five-star restaurants, you’re probably going to need to adjust how you save for retirement.

Here are a few questions that’ll help you start dreaming: 

• How much do you plan to spend on travel every year?  
• How much will you spend on family (kids and grandkids)?
• Will you help pay for your grandkids’ college?
• Will you donate time and money to churches or nonprofits you care about?

Speaking of dreams, remember: Retiring well is possible if you follow the Ramsey plan—but nobody retires well by accident.

What’s Your Ideal Monthly Retirement Income?

If you were to retire tomorrow, how much would you need to withdraw monthly to fund your dream retirement? (That’s a question everyone needs to answer at some point.)

To find out, start with your current monthly income. That can give you a good benchmark for your retirement income goal.

Then, compare your current lifestyle with the lifestyle you want in retirement. If you want to live a little more extravagantly in your golden years, you’re going to need a larger income. But if you’re willing to scale back and live more modestly, you’ll need less.

What’s Your Ideal Retirement Age?

You need to know two things to figure this out:

• When you’d like to retire
• How many years you have until that date

For example, if your goal is to hang it up at age 65 and you’re 30 years old right now, you have 35 years to save and invest. Let’s look at what happens if we play with the numbers a little.

Let’s say you earn $80,000 a year, so investing 15% of your income means investing $12,000 a year (or $1,000 a month). If you saved that much a month for only 15 years and earned an 11% annual return based on the S&P 500’s historical average, your nest egg could grow to about $450,000.² But if you saved the same monthly amount for 35 years, you could have almost $5 million!

 

How Much Could You Save by Age 65?

Starting Age	Years Investing	Estimated Retirement Savings at 65
30	35	$4,928,297
35	30	$2,804,520
40	25	$1,576,133
45	20	$865,638
50	15	$454,690

Based on investing $1,000 per month with an 11% annual return

 

No matter how much time you have between now and retirement, it will require commitment to plan and save for the future. But the more time you have to save and invest, the easier it’ll be to build wealth that lasts.

What’s Your Current Retirement Savings?

You’ve got to know where you are before you can figure out how to get where you want to go. In other words, if you have retirement goals, how far along are you right now?

If you’re debt-free and already investing for retirement, good job—you’re ahead of the game. But if you haven’t started yet, don’t worry. The best time to start investing is 20 years ago, but the next-best time is today.

 

This Is How Much You Need to Retire Comfortably

 

What Other Factors Impact How Much Money You’ll Need to Retire?

The challenges you’ll face in retirement are pretty much the same ones you deal with today—they’ll just hit different once you’re no longer working:

• Inflation and your cost of living will feel different because you’re drawing on your investments now, not adding to them.
• Then there’s the stuff that’ll be all-new: Your withdrawal rate and rate of return will have a huge impact on your daily life.
• Add your health care expenses and Social Security to that maze, and you’re going to have a lot on your plate.

Let’s take a closer look at each of these factors.

Inflation

Inflation is the gradual increase in the cost of living over time. And it affects everything from the price of gas to how much it’ll cost you to enjoy a pepperoni pizza (in dollars, not calories). It’s a huge drag on your budget.

Inflation usually hovers between 3% and 4% annually (sometimes the cost of everything rises much faster than that.)³ When you’re planning your retirement goals, remember that the growth of your investments needs to outpace inflation.

Over a retirement of 20–30 years, inflation will take a huge bite out of your nest egg if you don’t plan for it. Based on the average inflation rate, if you need $3,000 a month to get by today, in 30 years you could need more than $7,000 a month.

Cost of Living 

It matters where you choose to spend your retirement: Retiring in Manhattan will cost a lot more than Peoria.

If you want to move closer to family but they live in an area with a high cost of living, you’ll need to revisit your goals. Maybe your dream retirement is just to live somewhere more affordable. It’s your decision. Just make a plan.

Withdrawal Rate

Your withdrawal rate is the percentage of your savings you’ll withdraw annually from your retirement accounts to cover living expenses after you retire. This is important. You don’t want to outlive your money.

Since figuring out your withdrawal rate is such a big deal, make sure you work with a financial advisor to help you land on the right number for you and your family.

Annual Rate of Return

The performance of your investments also plays a role in how much you need to retire. The S&P 500, which is a benchmark used to measure ROI in the stock market, has a historical average annual rate of return between 10% and 12%.⁴

If you’re invested in good growth stock mutual funds that regularly match or outperform the S&P 500, you’re in great shape. 

Health Care Expenses

You might need hundreds of thousands of dollars to cover your health care expenses during retirement. That’s not exactly chump change, so make sure to consider it and budget for it.

If you’re planning to retire before you claim Medicare benefits, save up lots of cash in a Health Savings Account (if you’re eligible) and make sure you have a good private insurance plan by the time you retire.

Social Security

We recommend that you don’t include Social Security benefits in your retirement budget. Why? Because unless Congress makes major changes in policy, Social Security will only be fully funded until 2033.⁵ Since it’s not exactly something you can count on anymore, think of it as icing, not cake.

The other kooky thing about Social Security benefits is that although you can start collecting them at age 62, you’ll receive larger benefits if you wait longer. But we recommend that you start receiving them at 62 whether you need them or not (so you can start investing that money sooner). Whatever you decide to do with your Social Security benefits, don’t count on Uncle Sam to swoop in and save the day.

Calculate How Much You Need to Retire: An Example

Meet Nick and Jessica, a married couple in their mid-30s trying to set their retirement goals. Their current gross household income is $100,000, which means they’re bringing in $8,334 per month before taxes.

They’d like to live a little more lavishly in retirement than they do now, and they’d like to retire in 30 years. After some back and forth, they agree that an income of $10,000 a month (in today’s dollars) would allow them to retire comfortably. 

Between them, they already have $25,000 in their retirement accounts.

Now they know:

• Their ideal monthly retirement income
• How many years they have to save and invest
• How much they currently have in retirement savings

With that information, they can calculate their retirement number and figure out what it will take to get there.

 

How Much Do Nick and Jessica Need to Retire?

Monthly retirement income goal	$10,000
Years until retirement	30 years
Current retirement savings	$25,000
Average annual rate of return*	11%
Average annual inflation rate**	3%
Withdrawal rate	8%
Total retirement savings goal	$3,640,900
What they need to invest monthly	$1,607

*The 11% rate of return is based on the current average annual return from 1928 through 2025.⁶

**We accounted for 3% inflation. The average rate of inflation since 1960 is between 3% and 4% based on historical data from the Federal Reserve Bank of St. Louis.⁷

 

And there you have it. If Nick and Jessica retire 30 years from now, they’ll need roughly $3.64 million in their nest egg to fund their retirement. To get there, they need to invest $1,607 each month.

Remember, after you’re debt-free, we recommend investing 15% of your gross income for retirement. Based on their current household income, 15% is only about $1,250 per month.

As you can see, there’s a little bit of a gap there. To fix it, Nick and Jessica need to consider the following options:

• Adjust their retirement goal. They could do that by reducing their retirement income goal, increasing their retirement age, or both.
• Boost their income. Nick and Jessica can brainstorm ways to increase their income so they can invest more each month for retirement.
• Cut expenses. The couple could take a closer look at their monthly budget and find ways to cut back on expenses so they can get closer to their monthly savings target.

Now it’s your turn. Go ahead and use our retirement assessment tool (it’s free). Plug in your numbers. Try out as many scenarios as you want. Once you know how much you need to retire, make a plan to reach your goal—and stick with it.

Here’s the best part: You don’t have to figure all this out on your own. Get in touch with an investment professional who can walk you through your investing options and help you work your plan. You’ve got this!